The Labor Department reported that inflation rose 6.4% in January, marking the seventh straight month of easing inflation since peaking at 9.1% in June. Although the U.S. inflation is moderating from historic highs, the pace of easing showed signs of leveling off with energy, housing, food, and other items keeping some pressure on prices.
Fed Chair Jerome Powell remarked that the process of lowering inflation to their goal of 2% is likely going to be ‘bumpy.’
Furthermore, with employers robustly adding 517,000 jobs in January and the unemployment rate falling to 3.4%, a 53-year low, the officials are concerned that the tight labor market would induce upward pressure on wages and prices.
Over the past year, consumers have been struggling with soaring prices, resulting in a decline in the real value of their income despite historic wage increases. Amid the Fed’s hawkish stance to keep raising interest rates in 2023 and inflation lingering at an elevated rate, a U.S. recession remains a possibility.
Given this backdrop, one should invest in high-quality, fundamentally strong stocks that deliver solid returns over the long term. Therefore, investors looking to generate long-term returns could add Visa Inc. (V), Cigna Corporation (CI), and Molina Healthcare, Inc. (MOH) to their portfolios.
Visa Inc. (V)
V is a leading payments technology company that facilitates digital payments among consumers, merchants, financial institutions, strategic partners, businesses, and government entities. In addition, it provides card products, platforms, and value-added services. The company offers its products and services under Visa, Visa Electron, Interlink, VPAY, and PLUS brands.
On February 8, 2023, V rolled out new offers focused to help small and micro businesses (SMBs) accept digital payments and fine-tune their essential systems to grow and build business resilience. With Visa SavingsEdge, SMBs could benefit from offers and discounts with key business-related suppliers while helping to support their bottom line.
V’s four-year average dividend yield is 0.62%, and its current dividend of $1.80 translates to a 0.78% yield on the current price level. Its dividends have grown at a 14.5% CAGR over the past three years and a 17.6% CAGR over the past five years. The company has been growing dividends for 14 consecutive years.
During the fiscal first quarter (ended December 31, 2022), V’s net revenues increased 12.4% year-over-year to $7.94 billion. Its operating income rose 6.6% from the year-ago value to $5.09 billion. The company’s non-GAAP net income grew 17.4% from the same period the prior year to $4.58 billion, while its non-GAAP EPS came in at $2.18, representing a 20.4% increase year-over-year.
Analysts expect V’s revenues to increase 7.9% year-over-year to $7.76 billion for the fiscal second quarter (ending March 31, 2023). Its EPS is expected to increase 10.3% year-over-year to $1.98 in the current quarter. The company surpassed the consensus EPS estimates in each of the trailing four quarters, which is excellent.
The stock has gained 10.9% over the past three months to close the last trading session at $229.39.
V’s POWR Ratings reflect this promising outlook. It has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has an A grade for Quality and a B for Stability and Sentiment. The stock is ranked #4 of 49 stocks in the Consumer Financial Services industry. Click here to see the other ratings of V for Growth, Value, and Momentum.
Cigna Corporation (CI)
CI is an insurance service provider operating through two segments: Evernorth; and Cigna Healthcare. The company offers a range of coordinated and point-solution health services and intelligence solutions through its Evernorth segment. Its Cigna Healthcare segment provides medical, pharmacy, behavioral health, dental, vision, and health advocacy programs for insured and self-insured customers.
On February 13, 2023, CI unveiled three distinct brands: The Cigna Group, the global health company; Cigna Healthcare, the health benefits provider; and Evernorth Health Services, the pharmacy, care, and benefits solutions provider. This evolution marks an important milestone in the company's history and reflects its growing portfolio of businesses to serve more people globally.
In the same month, the company increased its quarterly dividend by 10% to $1.23 per share, payable on March 23, 2023. Its four-year average dividend yield is 0.65%, and its current dividend of $4.92 translates to a 1.64% yield on the current price level. CI’s dividends have grown significantly at a 382% CAGR over the past three years and a 156.9% CAGR over the past five years.
For the fiscal fourth quarter (ended December 31, 2022), CI’s total revenues increased marginally year-over-year to $45.75 billion. Its shareholders’ net income grew 4.7% year-over-year to $1.2 billion. The company’s net income per share came in at $3.83, representing a 13% year-over-year improvement.
Analysts expect CI’s revenue to increase 3.5% year-over-year to $45.52 billion in the fiscal first quarter (ending March 31, 2023), while its EPS is expected to amount to $5.46. The company has surpassed the consensus EPS estimates in each of the trailing four quarters.
It has gained 32.9% over the past year and 15.5% over the past nine months to close the last trading session at $299.36.
It’s no surprise that CI has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. It has a B grade for Value, Stability, and Quality. Within the A-rated Medical - Health Insurance industry, it is ranked #5 of 11 stocks.
Beyond what we stated above, we also have CI’s ratings for Growth, Momentum, and Sentiment. Get all CI ratings here.
Molina Healthcare, Inc. (MOH)
MOH provides managed healthcare services to low-income families and individuals under Medicaid and Medicare programs and through state insurance marketplaces. The company operates through four segments: Medicaid; Medicare; Marketplace; and Other. It offers healthcare services through contracts with providers, independent physicians and physician groups, hospitals, and ancillary providers.
On October 3, 2022, MOH announced the closing of its acquisition of AgeWell New York’s Medicaid Managed Long Term Care Plan. As of September 30, 2022, AgeWell New York’s MLTC business served approximately 13,000 members. The acquisition should bolster the company’s operative capability.
During the fiscal fourth quarter (ended December 31, 2022), MOH’s total revenue increased 11% year-over-year to $8.22 billion. The company’s adjusted net income grew 41.2% from the same period the prior year to $240 million, while its adjusted EPS came in at $4.10, representing a 42.4% increase year-over-year.
The consensus EPS estimate of $5.39 for the first quarter ending on March 31, 2023, represents a 10% improvement year-over-year. The consensus revenue estimate of $8.34 billion for the current quarter indicates a 7.3% increase from the prior-year period. The company has an excellent earnings surprise history, as it surpassed the consensus EPS estimates in each of the trailing four quarters.
Shares of MOH have gained marginally over the past nine months to close the last trading session at $297.91.
MOH’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our POWR Ratings system. MOH has a B grade for Value and Quality. The stock is ranked #6 in the Medical - Health Insurance industry.
Click here to view the other ratings of MOH (Growth, Momentum, Stability, and Sentiment).
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V shares were trading at $228.22 per share on Wednesday morning, down $1.17 (-0.51%). Year-to-date, V has gained 10.06%, versus a 7.54% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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